Tuesday, November 10, 2009

Is that clear

Thanks to ANZ economist Cameron Bagrie, interviewed onMorning Report the other day, we now know what needs tobe done to make New Zealand productive and prosperous.Asked by Geoff Robinson for an ‘idiot’s guide to theeconomy,’ the redoubtable Bagrie tore into the subject likea shark leaping for bait. In essence, this is what he said(edited, but all his own words):

We need to step back and look at the big picture, becausethere’s an underlying weakness in the tax base and not alot of money left in the kitty. According to fiscalprojections we need to get used to a new normal as wecome to the long end of the curve. There is no free lunchhere. There has to be a process of fiscal consolidation. Theeconomy is a soup-bowl, a saucer or a bathtub with a fewwaves sloshing along the bottom. If we look like goingback to the old normal, the stick’s going to have to comeout and the Reserve Bank’s got to knock that on the head.Yes, there is positive momentum but going forward it’snot a robust recovery as we turn the corner. The ball’s notgoing to go over the fence every time. There’s a behaviouralaspect to the economy that’s going to be the big driver.